In additional evidence that Israel’s overheated housing market is cooling somewhat, for the first quarter of the year the number of home sales fell by 10% compared with first quarter 2016 – to 27,300 transactions, the chief economist’s office at the Finance Ministry reported on Sunday. The figures also show that the number of home sales in February and March were essentially identical, at around 8,800.

For the first time since October of last year there was not only a drop in new home sales but also among previously owned homes. Still, the major factor curbing the number of sales was a drop in the number of new homes sold by property developers. In March, developers sold 2,200 units, about 300 of which were through the government’s Mehir Lemishtaken program, through which developers are provided land at reduced prices to lower the price paid by home buyers.

In a market in which demand has outstripped supply, the government has been attempting to lower the cost of homes by boosting supply. The Finance Ministry’s figures prompt the question, however, of whether the drop in the number of home sales in the first quarter is a sign of slackening demand or a shrinking supply of available new homes for sale, as some building contractors are claiming. It appears to be a combination of the two, but in the absence of additional data it is impossible to know with certainty.

The government has also attempted to coax owners of apartments held for investment to sell them to boost the supply of homes for sale. A tax that would impose a special tax on owners of three or more units is currently facing a legal challenge before the Supreme Court, but the first-quarter data do show that investors are more hesitant to buy. In each of the three months of the quarter, investors bought about 1,500 units, but they sold about 2,200 units per month. That means the presence of investors in the market shrank, but also that the number of units investors would have made available for rent also dropped.

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